I am a Managing Partner at Brookside Strategies, LLC, an energy and utility management consulting firm based in Darien, Connecticut. I've spilled blood, sweat and tears grappling with the full spectrum of barriers and misconceptions about distributed generation and energy-efficiency technologies. Previously, I practiced law in New York City at Paul Weiss Rifkind Garrison & Wharton, LLP and Jenner & Block, LLP. I also attended journalism school at Columbia University and earned a JD at Stanford Law School. I've written about energy and environmental issues for Forbes, The Nation, Mother Jones and several other publications. I am the Chair of the Northeast Clean Heat and Power Initiative. Drop me a line - or two - at wmp@cleanbeta.com.

Blinded By The Sun: How Much Do Solar Panels Really Cost?

Nearly three years ago, a political controversy over the U.S. government’s loan guarantee supporting the once-promising but now bankrupt California solar start-up Solyndra seriously damaged support for clean energy in the United States.

At the time, I speculated that financial forces similar to those that sunk Solyndra would sooner or later sink several of China’s major solar equipment manufacturers.

A series of recent defaults at Chinese solar manufacturers suggest I was at least partially right.

In 2013, Suntech Power, a solar manufacturer based in China’s eastern province of Jiangsu, defaulted on $541 million of convertible bonds. In February, Suntech filed for Chapter 15 bankruptcy in Manhattan to seek protection from U.S. creditors.

Meanwhile, LDK Solar, a solar manufacturer based in the southern province of Jiangxi, defaulted on an equally massive bond that matured in February.

Threatened with the prospect of bankruptcy, LDK Solar said it had received $321 million in loans from a consortium of lenders led by the China Development Bank, according to Bloomberg.

The same banks have already lent LDK billions of dollars. In 2011, LDK received $8.9 billion from the China Development Bank, according to Mercom Capital Group, an Austin, TX-based energy consulting firm.

The full scale of financial subsidies the Chinese government has provided domestic solar manufacturers is stunning.

In 2009, while testifying before the U.S. China Economic and Security Review Commission in 2009, Ethan Zindler, the head of BloombergBloomberg’s New Energy Finance, suggested that these subsidies would result in a supply glut in the solar manufacturing sector.

Citing a $5.3 billion loan Yingli Solar had secured in 2010 from the China Development Bank, Zindler said: “That loan alone, and several others like it from the bank, could help double the world’s solar manufacturing supply of solar modules in just the next several years.”

Chinese manufacturers quadrupled production of solar panels between 2009 and 2011 and exported them at prices sufficiently low to expand China’s market share in the solar sector dramatically.

Between 2009 and 2011, the price of modules decreased from $2.79 to $1.59 per watt.

Chinese companies have argued that economies of scale and technical improvements are responsible for these dramatic cost reductions.

Not everyone agrees.

“The explanation for this simultaneous sharp increase in production and sharp price reduction is not entirely the happy economic event of unit cost reduction from economies of scale and improved technical performance with preservation of commercially attractive profit margins,” said the authors of an MIT report about the future of solar energy. “Rather the explanation for this price decline is overexpansion in global, primarily Chinese and Asian, production capacity of cells and modules, combined with a reduction in the demand growth of heavily subsidized PV markets in Europe caused by the financial crisis.”

After a 13-month-long investigation, the U.S. Department of Commerce similarly concluded that China has been illegally pricing solar exports below production costs to undercut foreign competitors and gain market share.

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Well, if you think it is Chinese subsidies then you should be buying solar PV panels with both hands and installing them. I don’t know. The price of raw silicon dropped heavily. And they figured that they can build the PV systems with lower grade silicon than is used for making chips. Plus lots of automation. You can buy USA made panels for around 80 cents a watt so why not Chinese ones for 50 cents? And various thin-film companies can probably do 50 cents per watt as well.

@spec9, Thanks for your comment. You raised several important points. “Dumping” is not the only reason solar prices have declined. Chinese manufacturers have made meaningful technical improvements and, in many ways, have become more adept at manufacturing solar equipment than their US counterparts. Nevertheless, I don’t think any of those factors can explain the precipitous solar price declines witnessed in recent years.

I totally agree with your suggestion that we let China subsidize us. The real cost of solar is not the solar panels. Installation and government obstacles are the major cost. I have had numerous quotes over the last 10 years and the installed price never changes. Comparisons to the cost of solar installations in Germany and other countries show that the vendors are eating all of the cost savings of solar panels.

Yet we have seen similarly steep cost declines for solar panels produced in the U.S. and other countries. Is EVERYONE ‘dumping’? Yes, the Chinese have the lowest costs, but the rest of the world isn’t far behind. Add Chinese “technical improvements” to greater economies of scale (they are outproducing everyone else), cheaper labor, and lower manufacturing costs due to lack of environmental regulations and the gap between Chinese panel prices and those in other countries is not surprising.

I recommend that you take a close look at SunPower if you want to see real tangible technical innovation is the world of solar cells & panels. They hold the world record in cell & finished panel efficiency. Esthetics is 2nd to none. Best warranty 25/25/87%. Financially solid with the 68% ownership by Total. Over 200 patients. They even put aside over 139,000,000 for future warranty claims.

The best part is that this is am American company based in California, in business for 27 years.

No, I do not work for SunPower. I am a 63 year old male designing and selling SunPower, Solar World, Silicone Energy and Itek Energy solar energy systems in Washington state. SunPower panels are simply the best solar PV panel made in America and many other places in the world. I would submit that any innovation we may see in Chinese PV panels is probably through reverse engineering and trade secret theft. Our little all employee owned company Sunergy Systems gave me a new career at 60 years of age after I got dumped from my previous company after 28 years of loyal service. I could not be happier with my new job. The solar industry now employes over 150,000 Americans like me and that is something we should cheer about.

Lastly, I have yet to have any of my prospect customer ever ask me to design and quote their solar PV system with Chinese PV panels. Everyone knows that they, the chinese panels, are not up to the quality standards of American made PV panels. I instead suggest Solar World panels because they are the ones that blew the whistle on China for dumping sub standard product int the world markets and go to to toe on pricing against Chinese panels.

First, if selling below the cost is done for a short period of time to increase the demand and subsequently to reduce the cost, it is an investment. If it is done to gain control of the market – it is dumping:) We are about to find out. If gaining the market share will be accompanied by reduced cost, the may not continue. Having said that, there is another important reason for Chinese (and us) to invest in solar

(since you are writing about environmental issues as well as energy,) you are certainly aware of the external costs associated with fossil feel, they must be accounted for when we discuss the cost of solar energy. I realize, that Forbes is one of few remaining bastions of Global warming … can I say – denial? – but one we factor that in, solar and other alternative energy sources look surprisingly affordable – simply because others are not. And the society cannot absorb those (ever growing and soon will be growing fast) costs forever

“We’re well on our way to solar for <$1/watt, installed. Best to get rid of your coal investments while they still have some value."

Sadly, you are mistaken on the actual cost. The price right now might very well be $1 per nameplate Watt for hardware. But that price doesn't include operational inefficiency (100W panels usually fail to produce more than 75W on a perfect day) or duty (even the best panel locations are ~15% cycle).

Adding in all imperfections, the price is still above $10 per useful Watt, a far cry from the 50-cent panels people dream of. And then you have to add the cost of batteries (and battery recycling, since those batteries are worse than flyash for the environment), and you start seeing why people are still using dirty, dangerous coal.

Here’s a couple of simple facts. Utility scale solar is now selling for around 5 cents per kWh in the Southwest US. A recent PPA in Austin, Texas was signed at less than 5c. Add in the 2.3 PTC (first ten years) and the cost of solar is under 7c/kWh in the sunniest parts of the US.

Solar delivers when power is in highest demand. Normally utilities would be purchasing gas peaker power or expensive peak power from other utilities so that <7c is a great bargain.

That's where we are right now. Right now the average installed cost of utility scale solar is just over $2/watt in the US. Installed solar is running about $1.50 in the UK, $1.30 in Italy and $1 in China. The US will work its way down to $1/watt – installed.

$1/watt installed is half of $2/watt installed That means that we're looking at solar PPAs for around 3c-4c (without subsidies).

You want to put your money into coal? Fine. But don't hit me up for spare change when you crash.

The thing about solar and rational energy for the entire planet is the inate nature of the established industries that provide energy to require excessive profits. Oil and gas have relentlessly over the past few decades bought rights, derailed development, and generally lobbied and bought off the government to protect themselves.

It is know that as early as the beginning of the 21st century Standard Oil, Ford, Chase and many others did everything within their power to deny anything Tesla developed to the public. Tesla had a working though inefficient solar panel as early as the late 1800′s, he had a proven and demonstrated electric car that used the amplified resonance of the earth’s magnetic field for power and proved that this same source could be used to power cities but he was targeted as a threat to big oil and those that invested in it.

Magnetic electrical generation mechanisms are being demonstrated on Youtube but the ability to market and get R&D is hamstrung by big oil. Battery companies are infiltrated with subsidiaries that produce essential components owned by big oil, parts manufacturing have the same problems. So does solar.

The cost is not the actual ability to produce the solar panels but the mark ups and the delays caused by big oil to drive the cost of waiting for the market making it necessary to shut down and declare bankruptcy. Big oil no longer needs to do anything more than delay a project, funding, control advertising and parts manufacturing to put down any eco or green energy project through its many subsidiaries.

It would be nice for people to think in terms as global citizens and not nationalistic us against them (China against US). If we would just reset our mindset into one that sees mankind and the earth as one unit without prejudice and hate we could become a far more advanced technological world. Who knows maybe the societal concept of Star Trek would prevail and we would be pioneering the galaxy.

But as for the problems in China as elsewhere one only has to remember that big oil and the worlds few rich that control the wealth of the world also controls the ecofriendly, renewable energies ability to get started. China’s rich are holding hands with ours and they are not going quietly into the night.

PV is the logical next step in transitioning from our current, problematic energy system to one that will dove tail into the next generations of renewable power infrastructure. A lot of the improvements in PV will also make many other devices more efficient as well. Battery storage systems are making big strides. Electric cars are becoming viable and soon they will be common place then the norm. We are still in the infancy of our growth towards efficient, renewable energy. How do we know that the Solyndra fiasco wasn’t a scheme invented by unscrupulous energy barons to discredit the solar industry? PV research needs to be supported by the governments of the world, business and those who author articles in business journals. It would be a disservice to humanity to sell us down the river because of 1 failed approach.

Surely “Chinese subsidies” are merely a way of investing in a start up industry to get demand moving. Once volume picks up then the experience curve kicks in and costs will reduce in an inverse proportionality (in addition to technical breakthroughs). I am baffled why you are baffled.